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Egypt GDP Q2 2018

Egypt: The economy grows at a strong pace in the April–June period

July 26, 2018

According to an announcement by the Ministry of Planning on 26 July, GDP increased 5.4% year-on-year in the April–June period (which is Q4 of Egypt’s 2018 fiscal year). This matches the growth rate achieved in the January–March period and suggests that, through to the end of FY 2018, economic activity continued to benefit from IMF-backed reforms which began in November 2016.

Although comprehensive data has not yet been released, strong investment and exports were reported to have contributed to over three quarters of achieved economic growth in the April–June period. Investment was likely supported by government investment spending and recent reforms to improve the business environment in Egypt, such as new industrial licensing, bankruptcy and foreign investment laws. Export growth, meanwhile, was driven by strong non-oil exports. Overall, this GDP reading also fits with the stronger PMI readings for the non-oil private sector in April–June compared to a year earlier.

Looking towards the fiscal years 2019 and 2020, Egypt’s economic outlook appears bright. Although inflation picked up in June on the back of cuts to energy subsidies and higher food prices, it is expected to return to a moderating trend in the coming months. This would be beneficial for private consumption, which will also be supported by higher salaries and pensions in the public sector—effective as of July. Investment will continue to benefit from recent reforms to improve the business environment, in addition to higher government investment spending in FY 2019 compared to FY 2018. However, despite recent progress in curtailing costly subsidies, the fiscal position remains vulnerable.

FocusEconomics panelists expect GDP to expand 5.1% in FY 2019, which is unchanged from last month’s forecast, and 4.9% in FY 2020.

Author:Edward Gardner, Economist

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GDP increased 5.4% year-on-year in the January–March period (which is Q3 of Egypt’s 2018 fiscal year) according to the Ministry of Planning, up marginally from the 5.3% expansion in the October–December period and marking a multi-year high.

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